Social Gaming Advertising: The Future
Published 16th March 2015
The social gaming industry attracts a lot of attention from spectators all over the world. As recently as January 2015, it was the topic of a paper by the UK Gambling Commission that investigated concerns over its relationship with realmoney gambling. The paper focussed primarily on social Games that replicated real-money casino games, such as poker, slots, or roulette. The Gambling Commission identified three major concerns associated with social gaming:
- Problem gambling risks – people spending too much time and money on them
- Traditional risks – increased participation in real-money gambling as a result
- Consumer protection risks – scams
The paper concluded in its findings that while these concerns may have some validity, the available data and evidence suggests that there is little need to move from the “watching brief ” position it has adopted on the issue in recent years. The UK Gambling Commission is ultimately just one voice among many which has opined on this area opening up, but their sentiment is a significant one, and points to an overarching sense that this area will hopefully be reclassified within the next year by media owners. Ultimately, it is the media owners who make the decisions, but backed by national bodies like the UK Gambling Commission, one would hope that within the next 12 months we will see an overall shift in policy by Google, which will hopefully open up previously off-limits products such as AdWords, AdMob, Google Display Network and YouTube. Whether these measures will be rolled out on a global level or simply across the UK to begin with, we are still unsure, but each channel will pose its own challenges and rewards.
PPC search strategies vary widely from industry to industry, and the gambling industry is certainly unique. In the UK alone, clicks on premium terms can cost anywhere from £0.15 to £150.00, and CPCs on premium terms are subject to huge fluctuations from month to month depending on competition and seasonality. On the term “online casino” alone, we have seen the average cost per click of this keyword increase by over 83% between October 2014 and January 2015, and it currently averages over £100. With costs this high in the UK, the quality of new players has to be questioned regularly, and for our gambling clients, analysing the lifetime value of players generated by PPC activity is as important to our strategic decision as seasonality and testing are. Social gaming, however, is a freemium model, which means no prizes or money can be won from playing them. Research conducted into the value of players from social gaming activity identified that only between 1% and 5% of players pay to play.2 It is further estimated that of this sub group, 15% account for 50% of total revenues generated. On this basis, of 10,000 players, 50% of total revenue would come from just 15 to 75 players. Ultimately, how lucrative this segment is will determine how high a cost per acquisition an advertiser is willing to pay, but with CPAs on gambling terms running up to £400, social gaming will not be able to compete in this space in the UK. Other countries where online gambling is not permitted currently, by contrast, offer enormous potential in this regard. A simple check of the keyword planner tool shows that premium terms in the US cost a fraction of those in the UK, and one has to wonder how long before this market is opened up to a product like social gaming. Unfortunately, cost-effective conversions on these terms are not available in the UK. The challenge is therefore to identify channels that are cost effective and relevant.The first of these channels to satisfy at least one of these criteria is AdMob. This is an area where there is already a large degree of cross over between online gambling and social gaming. Recently we have seen big gambling companies acquire social gaming technology (IGT’s purchase of DoubleDown) and also social gaming companies collaborating with regulated gambling businesses (Zynga’s deal with bwin.party), albeit less successfully.
With the PPC space already tightly contested in the UK, there is little to no room to compete against online casinos that can pay significantly more per click and justify the costs. The trick, therefore, is to not compete against these operators on their own territory, but in areas they are not allowed. Currently, neither social gaming or online gambling products can be advertised on the AdMob network, but we strongly suspect this will change with the next six months to a year. AdMob advertising and social gaming are an ideal fit, as this channel works perfectly for targeting people when they are engaged, and players who are paying to play are always engaged. The Gambling Commission’s analysis of the industry found that that a person who pays to play will spend on average 1.09% of total minutes in a month playing casino-style social games, which equates to 15-16 minutes per day. By comparison, non-paying players spend 0.14% of total monthly minutes playing these games, equating to just two minutes per day.3 It is therefore the case that the most engaged players are the most lucrative players, and it is reasonable to assume that targeting players already engaged on other apps offers a more cost-effective channel than traditional PPC. In addition, when you consider the fact that on average the over-46 age group offers the greatest potential for a strong ROI, then the AdMob network becomes even more appealing, given its ability to target demographically.
Google Display Network (GDN)
With the fast-growing social gaming industry still very much on the periphery in the UK, due in no small part to online gambling being such a dominant force, the ability to generate brand awareness is essential. While a major potential benefit of the AdMob network is its demographic targeting capabilities, it’s perhaps the ability of the Google Display Network to contextually target customers that excites potential advertisers the most. Targeting through the GDN has however often been hit and miss for many advertisers, and ultimately it depends on objectives as well as targeting. For many, the key to success on GDN has been remarketing, but if Google were to allow this activity on the social gaming space, it would run the risk of advertisers transferring cookie data from social gaming to online gambling, because this would be an obvious temptation for companies, in turn setting alarm bells ringing for the Gambling Commission. So, remarketing cookie-collected data is most likely to be a no-go area. Prospecting, however, should not be overlooked, and the biggest rewards will be there for the first people to master the channel. In an industry where 50% of total revenue comes from just 0.75% of its users, scale is of course everything. So to effectively reach a large-scale user database, advertisers will need to establish that balance between relevancy of traffic and how cheap that traffic can be. This is where GDN is in a league of its own. While traffic can cost up to £100 per click on PPC, a similar quality of traffic can cost as low as £1 per click on the Google Display Network. This then meets two important requirements:
- Cost-effective, scalable traffic
- Effective generation of brand awareness
To effectively generate brand awareness, all online channels need to be viewed as an entire ecosystem. While GDN offers both cost-effective clicks and generates brand awareness, the image assets are generally not engaging enough to influence a decision of their own accord. For this purpose, more engaging media channels also need to be employed, especially in the consumer consideration phase. YouTube is the perfect partner for this, ticking both boxes for being a cost effective source of traffic and generating awareness of product. As online marketers, we need to be able to view the overall conversion funnel, and the role each channel plays in the conversion path. Ultimately, feeding the top of the funnel becomes as important as reporting on a last-click basis. For marketers all over the world, however, the key to feeding this funnel is to identify opportunities where we can non-intrusively engage with customers. Not only does online video offer search marketers the opportunity to be as creative as possible in targeting, it is also the ideal channel to focus on the engagement aspect of social gamers, which is important as we know they are the most valuable. YouTube has become an online source for “how to” videos, and based on what it is the customer is looking for, we can infer a lot about what stage they are at in life, and whether or not they fit our ideal customer profile. As we know, engagement is key, and people who are actively searching for gambling videos online fit our profile perfectly, with videos such as “How slot machines work” and “How to play Texas Hold’em poker” attracting thousands of views a month. This is content which is extremely relevant and can be acquired relatively cheaply. New advertisers to an existing industry can offer new challenges and opportunities, but entirely new industries to an advertising medium are a completely blank slate. From the agency perspective, we have insights and learnings from the online gambling industry that by and large will transfer over to the social gaming space. On the other hand, social gaming is a completely different product, and one that needs to be treated as such. If our hunches are correct, and a reclassification of the social gaming industry as a whole is imminent, then not only are new streams of advertising revenue due to open up, but potentially also new countries. In a lot of ways this only makes sense. Taking the US market as an example, there are regular debates on the benefits of having a taxable income stream derived from online gambling, with the estimated value of this policy running into the billions. With such discussions taking place at federal level in the United States, it makes sense for businesses to align themselves with these discussions as early as possible. With the US landbased gaming industry already heavily invested in the space, we are viewing the possibilities of social gaming not only as a new industry, but one that could facilitate drastic policy changes in significant markets over the next one to two years.
“Currently, neither social gaming or online gambling products can be advertised on the AdMob network, but we strongly suspect this will change with the next six months to a year.”
“While traffic can cost up to £100 per click on PPC, a similar quality of traffic can cost as low as £1 per click on the Google Display Network.”